Depositors Burned in Cyprus

It seems that there was a 100k guarantee in place and that it is being reneged on. That is somewhat worrying.

That is the key thing. At least with the IBRC liquidation, anyone covered by the different deposit insurance schemes was fully compensated.

Since when does deposit insurance of 100% of the first 100,000 EUR per person per institution, that is in every EU country, not mean 100%?

Peoples trust in all EU deposit insurance schemes has been severally dented.
 
Without wanting to be seen as unsympathetic to the plight of depositors in Cyprus (whoever they are), I am bemused that nobody seems to be concerned at the plight of public sector employees in Ireland when their salaries were pillaged by Croke park1, and its successor Croke Park 2 by a far greater amount.

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Marion
 
Reuters: Cyprus in talks to change bailout bank levy for those with savings below 100,000 euros to 3% & 12.5% for people with larger amounts


Even 1 % is too much if you ask me below €100,000.
 
Why the big surprise? Irish Government stole 0.6% of all private pension funds on an annual basis for 4 years. Cypriot Government steals 6%+ of all bank accounts. Spanish, Italian & Portuguese Governments yet to make decisions??

After that, the nightmare when perhaps Irish Government can look again at taking more and Germans can dictate how much!
 
Cash is too liquid

Cash is very liquid and easy for other people to get their hands on.
Land on the other hand is rather unliquid and hard for other people to grab.
 
I'm so sad... I'm thinking of moving my savings back to Germany... So sorry!

Why such a tax in Cyprus? Isn't anyone aware of the domino effects on Europe this is going to generate? I agree with theresa1 who wrote that this is another Lehmann Brothers-case. I can only agree...
 
Yep, judging from some reports, it looks like the terms are going to be changed. Maybe the 9.9 and 6.7 were really just opening statements. It looks like a negotiation process is in train.
 
It was a signed and sealed deal with Eurozone minsters including Noonan. The massive outcry is the only thing brining people back to the table.

I would be surprised if anyone with deposits under the deposit insurance level of 100,000 EUR gets hit. The repercussions are just too great.

What is at stake is the credibility of all bank deposit guarantee systems throughout Europe.
 
I dont think the EU is too concerned about who pays what as long as the final tax take on the exercise is 5 billion or higher.

The temptation is there now to tax the higher balances more and the smaller balances less. My guess is that if they try and do this, the Russians will throw them a curve ball. Still all to play for.
 
The longer the final decision is delayed (banks now closed until Thursday) the more chance that it will be watered down or in fact a different approach will be thought out.

If Noonan had any input into this decision he ought to hang his head in shame and is not a fit a proper person to be minister of finance raping the population should not be on the agenda and it's a line that should never have been crossed there is now NO trust anywhere.

What were the finance minister thinking when they come up with this? just goes to further enforce the fact that the men in grey suits haven't a clue and it will only be when we get a fundamental change in the way we vote and the political parties as we know them are changed will we get rid of these parasites.
 
The repayment of all State Savings™ money is a direct, unconditional obligation of the Government of Ireland.
In your opinion, can I conclude from the statement above, is a guarantee that covers any circumstance. Unlike the “deposit insurance” which seems to have limitations, as in Cyprus.
Disregarding interest rates, would State Savings seem the safest place for a deposit?
 

State Savings 'guarantee' and deposit insurance are too very different things. They both carry different types of risk.

State Savings sell an investment product. Not a deposit product. The investment product typically has a fixed return akin to a deposit product. However, the risk is exactly the same as holding Irish government bonds. You are pari passu (equal) to all other bond investors. There is no cap. There is no limit. The risk should in theory be equal to the risk of the credit worthiness of the state.

With deposit insurance, the Deposit Guarantee Scheme, protects the first 100,000 EUR per institution per person. The risk above 100k, in the absence of the ELG, should equal to the credit risk of the institution that you have the deposit in. The risk below 100k should equal the risk that the CBI has enough to pay compensation, as the CBI did in the case of the IBRC liquidation.

A new risk, thanks to Cyprus, is that a state will impose a 'tax' that supersedes deposit insurance.
 
Meanwhile in Cyprus, president Anastasiades lacks the votes to pass the bill. Banks closed for the next few days at the very least.
 
The Cyprus situation raises the issue of the credibility of guarantees from any source and sets a very dangerous precedent. This could have unforeseen consequences. It could get out of hand. If it was reported that a number of big corporations withdrew funds from any of the vulnerable countries banks who knows what could happen
 
In January 2012 Standard and Poor's downgraded its long-term credit rating for the Republic of Cyprus from BBB to BB+ citing it's opinion of the effect on Cyprus of deepening political, financial, and monetary problems within the eurozone, with which Cyprus is closely integrated.

The downgrade also reflected the view of Cypriot financial institutions' significant exposure to Greece, which was believed to further exacerbate Cyprus' existing external vulnerabilities.

Savers in Ireland should note that this downgrade was equivalent to moving from where Ireland is currently rated, down just two notches.

Roll the clock on a little over a year and S&P's concerns appear to have been realised with the Cypriot banking system now requiring a bailout of some €10-12 billion, and in a new twist in the ongoing saga, the government has been forced to consider imposing burden sharing upon ALL depositors.

The proposal on the table is that those with deposits below €100k in a bank will be “taxed” at 6.75%; those with deposits above €100k will be “taxed” at 9.9%, contributing approximately €6bn to the bank bailout in total.

This proposal overrides existing depositor insurance schemes. Although most of us have been assuming that no matter what, deposits up to €100,000 are protected under an EU-wide deposit protection scheme, instead savers will receive equity in their respective banks by way of compensation.The shortfall of €4-6 billion will have to come from the ECB/IMF.

This highlights, at a time when Ireland is about to end the Eligible Liabilities Guarantee, the very real risks faced by savers in deposit institutions subject to "guarantees" which is that the guarantee is really only as good as the ultimate backing of the country issuing it. In the case of Ireland this means a Sovereign State rated just two notches above Cyprus.

It seems reasonable to assume that anyone with over €100k in deposits with a single banking group should expect to bear some risk in the event of a collapse of a bank. As we know, this has already happened in Ireland with certain structured products issued by Anglo Irish Bank having already defaulted.

However, the key insight from Cyprus is that a precedent has now been created in terms of the socialisation of losses across bank deposits and now not even €100,000 can be viewed as "certain".

We have argued consistently for the last 5 years that risk and expected returns are related. If an Irish bank is paying above the market rate of interest for deposits, then this has to be seen as some manifestation of risk.

We recommend that cash and fixed interest investments should have an average AA+ credit rating and this now rules out virtually every single institution operating in the Republic of Ireland with even RaboBank now "only" rated AA.

With interest rates so low on bank deposits, it seems possible that savers will now be more willing to consider alternatives and most, without a clearly thought out plan, will be prey for the financial services sales machine.

Before you leap out of the frying pan and into the fire think about what you need your money to do for you, and consider working with a financial planner who has your best interests at heart rather than a commission based sales person who will tell you what you want to hear.
 
Worst case, 2/3 majority of ECB board decide to pull Emergency Liquidity Assistance, which would be followed by a Eurozone exit and conversion to a new currency.

More likely, Cyrpus will simply renegotiate. This needs to happen urgently.
 
Emergency Liquidity Assistance. Money from the ECB to banks.

Irish banks still have huge ELA but it is declining fast. Cypriot banks have huge ELA exposure.